Panel snuffs tobacco tax hike

A bill to raise money for education by boosting state cigarette taxes by $1 a pack went up in smoke Thursday when a legislative committee voted unanimously against the idea.

The House Business and Industry Committee voted to table House Bill 35, sponsored by state Rep. Brian Egolf, D-Santa Fe, effectively killing it for this session.

Egolf said the legislation would have raised $36 million, which would have been earmarked for the public schools. He also said raising the price of cigarettes would be the best way to discourage teenagers from smoking.

Egolf also argued that the tax eventually would save money on Medicare and Medicaid because fewer people would start smoking as teens.

Health advocates, including the American Cancer Society, supported the bill. So did several labor and religious organizations, who saw they bill as a way to prevent further cuts to education and other state programs as the state grapples with a $600 million budget shortfall.

Gov. Bill Richardson in recent weeks has said he could support an increase in tobacco taxes.

Opposing the bill, however, were tobacco lobbyists and representatives of several business groups.

Among the opponents was Mark Smith of the Santa Fe Natural Tobacco Co., the locally-based maker of American Spirit cigarettes. Smith said the company, which manufactures its cigarettes in North Carolina, employs 450 people. “We pay a good wage,” he said. “We’ve been in Santa Fe 27 years.” Smith claimed the cigarette tax increase would cause the loss of hundreds of jobs statewide in the retail industry.

State Rep. Jim Trujillo, D-Santa Fe, praised Santa Fe Natural Tobacco, noting the company is headquartered in his district. He said he’d fight to protect the company even if it meant voting against the bill — which he did.

Some opponents noted that the federal tax on cigarettes went up by 62 cents a pack only last year.

Rep. Eliseo Lee Alcon, D-Milan, who said he chews Skoal, told the committee he’d start buying his chewing tobacco at tax-free stores on Indian land if the tax goes up. His local Allsups convenience store would lose out on the $3.80 he spends there every five days on Skoal, he said.

Some committee members questioned the earmarking of revenue from the bill for education. Some expressed the fear that other funds getting revenue from tobacco excise tax — such as the University of New Mexico Cancer Center and the rural cancer treatment program — would be shortchanged.

Egolf tried to explain that while the percentage of the revenue going to those programs would go down, the actual amount would stay the same. That is because there would be more revenue coming in from the tax increase.

But some members worried that if tobacco consumption went down — as advocates predicted — revenue for these programs would suffer. Both Egolf and an analyst for the state Tax and Revenue Department said projections show the revenue would not fall.

The committee chairwoman, Rep. Debbie Rodella, D-Espanola, said that earmarking the money for education caused confusion among members. Interviewed after the meeting, Egolf said that might have been a factor in the bill’s defeat. He said he included the earmark because polling last year showed wide public support for increasing the tax to pay for education.

There are two Senate bills still alive that would raise cigarette taxes. But even if one or both those passed the Senate, they likely would have to go through the same committee that voted down HB35.